Commercial Division Blog

Posted: October 22, 2017 / Categories Commercial, Default Judgment

Default Judgment Vacated Because of Possible Misrepresentations in Complaint

On October 10, 2017, Justice Knipel of the Kings County Commercial Division issued a decision in Dean Builders Group, Inc. v. Crew Contracting of New Jersey Inc., 2017 NY Slip Op. 32122(U), vacating a default judgment even though the defendants did not proffer a reasonable excuse for the default because of possible misrepresentations in the Complaint, explaining:

CPLR 5015(a)(3) permits the court that rendered a judgment to relieve a party from it on such terms as may be just on the ground of fraud, misrepresentation, or other misconduct of an adverse party. A defendant moving to vacate a default based on intrinsic fraud, i.e., on the basis that the allegations in the complaint are false, must establish both a reasonable excuse for the default and a potentially meritorious defense to the action.

Here, Crew and Ahmed have proffered no valid excuse for their default in answering the complaint. Consequently, the Court need not address whether they have a potentially meritorious defense. In addition to the grounds set forth in section 5015(a), a court may vacate its own judgment for sufficient reason and in the interests of substantial justice. That is, a court may rely on its inherent authority to vacate a judgment in the interest of substantial justice, rather than its statutory authority under CPLR 5015(a), as the statutory grounds are subsumed by the court's broader inherent authority.

The plaintiff appears to have obtained the default judgment through an affirmative misrepresentation to the Court that Ahmed executed the bill of sale. Ahmed proffers an affidavit of his handwriting expert opining, based on the comparisons of his signatures on other documents, that the signature in question is not his. Ahmed further proffers his foreign passport indicating that he could not have signed the bill of sale on the day in question. Moreover, the principal sum of the default judgment of $191,543.14 is three times more than (1) the total invoiced amount of $55,100.85 as reflected in the bill of sale, and (2) the amount of $58,212.90 which the plaintiff, in its moving papers, has offered to ABCD and Westchester in return for their concession that the plaintiff may collect on the payment bond. The questioned validity of the bill of sale, coupled with the plaintiffs apparent overstatement of the amount due under the bill of sale, is the type of circumstance warranting vacatur of the default judgment in the interests of justice. Accordingly, the default judgment is vacated. Crew and Ahmed's default in answering the complaint is also vacated, and they are granted leave to serve a late answer. Inasmuch as Crew and Ahmed did not participate in discovery, it is incomplete, and the Court sua sponte vacates the note of issue and strikes this action from the trial calendar.

(Internal quotations and citations omitted) (emphasis added).